Funds That Advertise Deliver Lower Returns

Mutual funds that shell out advertising money do win more investors. However, those clients might be paying a higher price in the end. Mutual funds that advertise don’t perform any better than their competitors, a Sweden study found. In fact, it is possible that the higher advertising costs cause firms to charge higher fees, meaning that customers may actually earn less income over time. “Mutual fund investors who pay attention to ads could end up with less money available for retirement,” said Henrik Cronqvist, author of the study and assistant professor of finance at Ohio State University’s Fisher College of Business. The fund industry spends about $6 billion each year on advertising in the U.S, Cronqvist noted. Not a lot of attention has been to paid to how advertising affects consumers.   “Mutual funds that would be good choices based on my study would be those that are not heavily advertised and which do not spend a lot of money on branding. If they spend a lot of money on branding, they probably will have to pay for that with higher fees,” Cronqvist said.     The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.